Minister Reed buckles under lobbying for ‘feudal’ landlords

BARRATT HOLMES, housing correspondent, on how an election promise to scrap ground rents for leaseholders has been watered down to something which now won’t take full effect until the year 2066

Groups representing leaseholders and renters have accused the Labour government of “feet-dragging” and “tinkering around the edges” over its proposals to cap ground rents and reform the leasehold system.

The Commonhold and Leasehold Reform Bill, published today, was first put forward in the King’s Speech in 2024.

Keir Starmer’s Labour made an election promise to sweep away ground rents altogether, in a thorough modernising overhaul of the medieval land ownership rules in England and Wales. The measures were strongly supported by his former Deputy PM, Angela Rayner. But since Rayner has been replaced, the policy has been significantly watered down.

Today, the housing secretary is Steve Reed, the MP for Streatham (and Croydon North when he can be bothered).

Reed has announced that ground rents will be capped at £250, only reducing to the promised peppercorn rents in 40 years’ time.

And the £250 ground rent cap will not come into effect until 2028.

The government has been accused of buckling to lobbying from landlords, who have described the cap on their money-for-nothing ground rents as “wholly unjustified”. Lobby group the Residential Freehold Association sent its latest letter to Reed at the Ministry of Housing, Communities and Local Government only yesterday.

It is reckoned that there are around 5million leaseholders in England and Wales, around 19% of the countries’ housing stock. Of those, 1.3million leaseholders live in London. On average, leaseholders pay £350 per year in ground rent.

The number of leaseholders has been increasing rapidly – at a rate of around 100,000 a year for the last five years, as more people are forced into buying flats, rather than being able to afford houses, which typically come as freehold.

Those who buy flats usually do so as leaseholders. The land-owner, or freeholder, under feudal English land laws, is entitled to charge an annual ground rent, as well as service charges for the upkeep and maintenance of the property.

Under the Bill’s reforms, there is to be a consultation over a complete ban on new leasehold flats, with “stronger control, powers and protections” for leaseholders.

Existing leaseholders will get the right to switch to commonhold, in an effort to give homeowners greater control over their properties.

Commonhold allows flat-owners to own their unit outright forever, with no lease, ground rent or expiration date. Residents jointly own and manage shared areas via a commonhold association.

Forfeiture, whereby leaseholders can lose their home and the equity they built up by defaulting on a debt as low as £350, will be abolished and a new enforcement regime will rebalance the system – making it fairer between landlord and leaseholder.

Liam Spender, the lawyer who has led the public campaign to scrap leaseholds, said: “Some will no doubt be disappointed that ground rents are not being eliminated immediately and are instead being phased out over 40 years.

“However, crucially the cap will make it cheaper for people to buy the freehold and to extend their leases, both of which are priced by reference to ground rent values.

“Ending ever-increasing ground rents should also make flats easier to sell and mortgage because there is often a need to vary ground rent terms simply to get transactions over the line.”

Harry Scoffin, founder of campaign group Free Leaseholders, was sceptical of the timing of the reforms, with the cap coming in in 2028, the year before the scheduled next General Election. “A ground rent cap not taking effect until the end of 2028 is far too close to the next general election, repeating the foot-dragging of governments of old,” he said.

Starmer announced the planned legislative changes via TikTok, the Chinese social media platform. It is the first time that a British Prime Minister has used TikTok to make such an announcement. Starmer is due to fly to Beijing this week for talks with the Chinese government.

Today, his housing minister, Reed, said: “If you own a flat you can be forced to pay ground rents that can become completely unaffordable.

“We said we’d be on the side of leaseholders – which is why today we are capping ground rent, helping millions of leaseholders by saving them money and giving them control over their home.

“The leasehold system has tainted the dream of home ownership for so many. We are taking action where others have failed – strengthening home ownership and calling time on leasehold for good.”

Jo Darbyshire, the co-founder of the National Leasehold Campaign, said: “Let’s remember that ground rent is a charge for no service. It’s money for nothing… However, 40 years is an incredibly long time to wait for peppercorn ground rents.”

And Jae Vail, spokesperson for the London Renters Union, said: “The leasehold system needs to be abolished for good.

“The government promised to bring an end to this ‘feudal system’, but instead it is tinkering at the edges.

“Labour should make good on their promise and then tackle the spiralling costs faced by all other forms of tenure: private rents, social rents and skyrocketing service charges.

“To truly end the housing crisis, we need rent controls that steadily bring down costs for everyone as well as a mass council housing programme.”

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